Oleg Deripaska (lead image, right), the controlling executive of Rusal, Russia’s state aluminium monopoly, has run into difficulty winning the approval of the British Government’s stock exchange regulator, the UK Listing Authority (UKLA), for an initial public offering (IPO) of shares in EN+. This is the holding unit through which Deripaska runs Rusal; the Siberian hydroelectricity generating company Eurosibenergo; and coal and molybdenum mines. Asked to respond to the informal approach which has been made so far on Deripaska’s behalf, UKLA spokesman Chris Hamilton refused to confirm or deny the approach, adding: “any interaction we may have with a firm wanting to list is confidential so [it] isn’t something we can comment on even off the record.”

Rusal insiders say no international bank has accepted Deripaska’s mandate to manage and underwrite a London Stock Exchange (LSE) listing for EN+. That leaves only Kremlin backing for the share sale through the state banks, said the insider. “My understanding is that VTB and Sberbank play an active role in it.”

An earlier attempt, promoted by Deripaska in Bloomberg at the start of February, for Rusal to sell its shares on the LSE, was a feint, a Rusal source said. It was aimed at deterring Mikhail Prokhorov’s Onexim group, a minority shareholder which has been trying to sell its 17% stake in Rusal for years, from making a deal at a discount to the market price for the share. “It has never been seriously considered,” the Rusal insider said. “It was EN+’s and Rusal’s attempt to thwart Onexim’s sale of its Rusal shares to the market, which Deripaska considered harmful to Rusal. This is an example of fake news.”

Part of the problem, London market sources add, is that the EN+ share sale is viewed outside Russia as a bid by the Kremlin to demonstrate investor confidence in the future of the Russian economy, despite sanctions. “But if you can’t disguise that nobody is buying except for the Russian state banks, then the scheme is self-defeating, just as the Rosneft share sale was last year.” For details of that story, read.

Another problem, market sources in London say, is that Deripaska himself has already demonstrated considerable risks for investors in the Hong Kong listing of Rusal, now priced at a third of its IPO value. Deripaska risk, they add, also led to the US Government rejecting a deal for the sale of the Opel division of General Motors to a Deripaska-led combination with Sberbank and German government funding; Deripaska was turned down in 2009. For details, read this. Last month, the Opel sale was agreed to the French Peugeot PSA group.

On May 15 Deripaska launched a lawsuit in federal US court in Washington, DC, in a bid to defend his reputation in that country. “Mr. Deripaska has never stolen assets from Ukraine or elsewhere”, lawyers for Deripaska say in the 12-page complaint against Associated Press (AP) of New York, which can be read here. It is defamatory, the lawyers add, to make Deripaska “appear to have been engaged in criminal conduct” and “making him appear infamous or odious.”

At its current share price Rusal has a market capitalization of HK$57.3 billion (US$7.4 billion), and it is carrying $8.6 billion in loans and borrowings. For Rusal’s May 11 audited financial report, read this.

EN+ has issued a single-page press release of its financial condition last year, but it has yet to publish an audited financial report. It says it has debts of $5 billion; they don’t include Rusal’s debts.

EN+ also claims that last year’s revenues came to $9.8 billion, of which $2.5 billion were allocated from electricity, coal and other mining operations; the balance of the group’s revenues was allocated from Rusal, minus intra-group sales. EN+’s stake in Rusal is 48.1%.

The EN+ website doesn’t identify a current board of directors. In the past the board reportedly included Maxim Sokov (left), the chief executive; Nathaniel Rothschild (centre); and Philippe Mailfait (right, photo identification unconfirmed), a Franco-Canadian whose involvement in EN+ has exposed a tangle of registrations and shareholdings yet to be clarified. For more, click.

The EN+ promotion of a London IPO claims that a share sale of 20% to 25% should fetch between $1.8 billion and $2 billion, thus valuing EN+ at between $7 billion and $10 billion. That’s the same value range which, in better times, Deripaska fixed as the valuation for Eurosibenergo, the hydroelectricity generating unit of the EN+ group; for that story, read this.

Eurosibenergo has since been enlarged with the state stake in Irkutsenergo, but the value of the electricity it makes which Rusal turns into metal has plummeted. According to Sokov, “we shall be able to commence evolving into a unified operating company now that we complete the acquisition of the shares in JSC Irkutskenergo. This will provide much stronger positions for the entire En+ Group, will get us an access to the capital markets and shall eventually enable us to implement our core investment projects. No doubt this will drive us closer to becoming a full-fledged peer to the world’s leading energy companies”.

The calculation of the value of a combination of Siberian electricity with Siberian aluminium in a holding like EN+ requires advanced mathematics, spelled out here. It also requires an unquestioning Kremlin, acquiescent federal power tariff regulators, and compliant regional governors.

Such calculations of what Russians call “administrative resources” presume confidence that Deripaska will keep the backing of President Vladimir Putin; that he is one of what the US Treasury likes to call Putin’s cronies; and that he will continue to be the trustee of semi-nationalized Russian corporations held on a tight leash by the state banks, Sberbank and VTB. VTB executive Riccardo Orcel (right) has been a director on the EN+ board since the bank converted $500 million in EN+ debt into equity in 2011; that put a valuation on EN+ of about $11.5 billion, but the number was not considered by London bankers to be a genuine valuation. It also required advanced maths to make it appear to be something other than a Kremlin favour for those involved in the transaction. Non-transparency has been VTB’s byword in its dealing with EN+; read more. A prospectus for EN+ from VTB is likely to continue that, a London source comments, not improve on it. VTB and Sberbank decline to respond to questions about their role in the proposed EN+ share sale. “If VTB would like to cash out its EN+ stake in the IPO,” comments an insider, “would it make sense for the bank to lend to a related party for the sale?”

A minor mining element in the EN+ group, Strikeforce Mining & Resources (SMR), a molybdenum specialist, was also set up for a Hong Kong Stock Exchange (HKEx) listing when Deripaska thought he could count on Chinese share-buyers. That was in 2010 when the Bank of China, Deutsche Bank, and Renaissance Capital of Moscow acted as spruikers for a valuation of between $725 million and $1 billion. An earlier attempt by the Bank of China and Morgan Stanley at listing SMR in 2008 failed to drum up buyers at $700 million. Read the story here.

The molybdenum price is now down to less than half of what it was when SMR couldn’t attract share buyers.

In Hong Kong, market watchers have long reported their suspicion that trading in Rusal shares has been so thin that the price movement was easy to manipulate. For the story of how that was done, read this. In Moscow and in London there is a long history of conflicts between Deripaska, the stakeholders he represents, and minority shareholders including Prokhorov, Victor Vekselberg, Glencore, and Mikhail Chernoy (Michael Cherney). Their evidence in and out of the London courts reportedly killed attempts Deripaska made to list Rusal shares on the LSE a decade ago.

Prokhorov’s Rusal sale deal, confirmed on February 14, the week after Deripaska’s advertisement for a London IPO, disposed of 3.3% of Rusal shares. In the process, the demand for a discount on the highly illiquid paper topped Rusal’s share at a peak for the year of HK$4.86, and reduced the price for Prokhorov to HK$3.95 – a discount of 19%. The share price has continued falling since then, and is currently at HK$3.77.

Vekselberg and Len Blavatnik, whose SUAL Partners hold 15.8% of Rusal’s shares, continue to negotiate with Prokhorov to buy the remainder of his stake.

Promotion of the EN+ listing in London has come from the Financial Times, a long-time booster for Deripaska when Catherine Belton was a reporter in the newspaper’s Moscow bureau. The new FT promoter is Henry Foy. On April 26 Foy claimed that EN+ “has hired six investment banks to advise on the process, said three people briefed on the plans.” The six banks, according to Foy, include two US banks which have proved to be sensitive to US Treasury sanctions for Russian capital transactions. Foy was told by EN+ that Citibank is “the lead bank on the issue, alongside JPMorgan, Credit Suisse, Société Générale and Russian lenders Sberbank and VTB Capital.”

Rusal insiders claim the report is “premature”. A Moscow analyst covering Rusal adds: “information about the mandated arrangers and underwriters of the EN+ listing is confidential – for us also – and is being given out only to share-buyers and investors.”

Other bank analysts following Rusal and spokesmen for the Russian state banks refuse to answer questions about the proposed share sale and the institutions reportedly participating. According to Foy, Deripaska “is in talks to appoint three independent directors including a new chairman ahead of the prospective July listing.” The independence of British names in Russian company board seats became an issue of public controversy, as well as litigation, during the brief time Eurasian Natural Resources Corporation (ENRC) was listed on the LSE. The Anglo-American war for regime change in Russia has also discomfited many of these lords on boards.

Deripaska’s record for managing the independence of board directors has been deterring candidates who remember that Brian Gilbertson of BHP Billiton was removed in 2007. Victor Vekselberg, board chairman who followed Gilbertson for the 2010 listing, resigned in protest in 2012, and subsequently won legal challenges to metal trading terms Deripaska had arranged with Glencore, without board approval. His successor Barry Cheung was forced to resign from the Rusal board in 2013. His replacement as chairman, Matthias Warnig (below, right), is independent of Deripaska, but not of the Kremlin.

On May 10, Foy published his second promo for Deripaska and EN+, claiming “for international investors craving an opportunity to buy into Russia’s historically volatile but currently profitable energy, mining and commodities sectors, a planned initial public offering in London offers what appears to be an alluring prospect.” Foy did not identify an investor to corroborate his craving. “While EN+ flirted with a Hong Kong listing, and also looked at going public in Moscow, London’s significantly bigger investor base emerged as the natural choice for a company that would be attempting the largest Russian share offering for almost five years. London is also seen to have a better understanding of the renewable energy assets that EN+ is keen to trumpet as a major part of the offering.”

Foy (pictured below left) arrived a few weeks ago at the Moscow bureau of the London newspaper without expertise in either the London stock market or the energy, mining and commodities sectors. He had been the FT correspondent for Central Europe, based in Warsaw. There he established himself as a promoter of ex-Foreign Minister Radoslaw Sikorski (centre); of US government campaigns against Russia; and fatefully, of the career prospects of the Czech State Secretary for Europe, Tomas Prouza (right).

Warsaw and Prague sources claim Prouza was behind the tip which Foy published as a tweet on February 27. This said the Polish government of the Law and Justice Party was planning to topple the Polish president of the European Union, Donald Tusk, the former Civic Platform Party prime minister in Warsaw. In fact, the Poles were discussing a plan for the four Visegrad group of governments — Czech, Slovak, Hungarian, and Polish – to make a collective bid to replace Tusk with a candidate they preferred. Foy’s leak was intended to kill the plan.

Following investigations of the leak in Prague and Warsaw, Prouza was ousted from office; he claims to have resigned to take another job. Polish sources say that so far none has materialized. Foy moved from Warsaw to Moscow.

Although the FT’s editorial stance has become progressively more hostile towards Putin since 2014, Deripaska has kept support from the newspaper’s staff. He also employs the Schillings law firm of London to deter negative reporting from the press and from institutional analysts. Until Deripaska became the target of reporting by Associated Press in March, he had never sued for media libel in a US court. According to last week’s court claim, “the AP acted with actual malice in publishing the Article because prior to publication it knew that such statements were false, or at minimum entertained doubts about the truth of the defamatory statements contained in the article.”

Deripaska’s lawyers identify him in the claim as a “private investor and industrialist” and “CEO of United Company RUSAL, one of the world’s largest aluminum companies.” There is no mention of EN+. EN+’s spokesman declined to say if it has applied for Russian government permission to sell shares in London or confirm other details of the IPO which have been leaked.

In the past Deripaska has been targeted by civil racketeering lawsuits in the US, and has won many federal district and appeal court verdicts upholding his claim that US jurisdiction should not apply. Last week’s filing in Washington is the first venture Deripaska has initiated to test his business reputation in a US court.